Hoffman et al. v. Knox et al., 50 F. 484

Fuller, Circuit Justice, after stating the facts, delivered the opinion of the court.

By the decrees of September 8 and October 14, 1887, all claims against the property in question, and the order of their priority, and the exceptions to the various reports, were disposed of, and the then final report of the master, as amended and reformed in accordance with the views of the court, was approved and confirmed, and thereupon commissioners were appointed to sell the entire property upon the terms of 'one fourth cash, and the balance payable in one, two, and three years, with Interest from the date of sale, with security.

The sale thereupon took place and was confirmed May 26, 1887, and distribution made of the cash payment, and a final settlement with the receiver was directed. It seems to us that these decrees were and must be regarded as constituting a final decree in the case. We treat them together because the decree of September 8th, while it disposed of nearly all the claims and exceptions, reserved the determination of a specific claim or claims, which was arrived at by the adjudication of October 14th, and it was the latter, which, ail these matters being concluded, decreed the sale.

If an appeal had been taken by the present appellees to the supreme court of the United States, and the decree had been affirmed, the court below would have had nothing to do but to execute the decree which it had already entered. What remained to bo done was merely in execution of what been determined, such as the collection of the outstanding payments,, settling the receiver’s accounts, payment of costs, and the like; and this if' no less so because some other creditor might turn up, and seek to come in under the decree.

The bringing of the fund into court was for the final distribution as decreed, and not to he held pending the ascertainment of the prineinles upon which it should he distributed. Hill v. Railroad Co., 140 U. S. 52, 11 Sup. Ct. Rep. 690; Bank v. Sheffey, 140 U. S. 445, 11 Sup. Ct. Rep. 755. The petition for rehearing presented May 8, 1889, came too late. Equity rule 88, The qircuit court held, however, that the petition could be treated'as, and in fact was, a bill of review for errors apparent, and might bo filed as such.

Considered in Ibis aspect, did the court err in the decree entered thereon December 19, 1889, reversing and setting aside the decrees of September 8 and October 14,1887, “in so far as they gave priority to the claims of the supply and labor creditors of the said Columbia Liberty Iron Company as superior to the rights of the first mortgage bondholders?” This question is to be determined without resort to tho proofs, upon the pleadings, proceedings, and decrees which in this country constitute the record proper. Assuming that these were fully set forth in the bill, the demurrer raised the question.

Being overruled, the decrees were reversed; if sustained, the bill would have been dismissed. Other matters are referred to, but they may be disregarded on this inquiry, and the bill taken as a pure bill of review for error apparent, thus stated by the circuit court, in its opinion, which will be found reported in 42 Fed. Rep. 878: “In the master’s reports, as eoniirmod, priority is given to certain labor and supply claims, contracted by the company before the appointment of tiie receivers, over the bonds secured by the mortgage.

This priority was in accordance with the provisions of two acts of the general assembly of Virginia, approved, respectively, March 21, 1877, and April 2, 1879. Since the entry of the decrees of September 8 and October 14, 1887, in this cause, the Virginia statutes giving labor and supply claims a priority over the liens of the mortgage bondholders have, as to supply claims against railroad corporations, been declared by the court of appeals of Virginia to he unconstitutional, as in violation of

article 5, § 15, of the constitution of Virginia. Fidelity Ins., etc., Co. v. Shenandoah Val. R. Co., 86 Va. 1, 9 S. E. Rep. 759. And this court has also, after full argument, in Fidelity Ins., etc., Co. v. Shenandoah Iron Co., 42 Fed. Rep. 372, decided the act of April 2, 1879, to be unconstitutional as to both labor and supply claims against mining corporations.

It is in view of these decisions that these petitioners ask leave to file their petition to have this cause reheard, and the decrees of September 8 and October 14, 1887, reviewed and reversed. * * * But if it could be conceded that the decrees of September 8 and of October 14,1887, are final decrees, the court is of opinion that the petition can be treated as, and in fact is, a bill of review for errors apparent on the face of the record, and might be filed as such.

The recent decisions referred to, as deciding that the statute giving labor and supply claims the priority over the lien of the mortgage bondholders is unconstitutional, clearly presents 'a question of error on the face of the record. * * *' Since the rendition of the decrees complained of, the highest state court has declared the statute upon which the lien rests, or out of which it arises, to be invalid because unconstitutional, and federal courts will judicially notice and accept such decision.” To sustain a bill of review for error of law apparent, the decree’ complained of must be “contrary^ to some statutory enactment, or some principle or rule of law or equity recognized and acknowledged, or settled by decision, or be at variance with the forms and practice of the court.” 2 Daniell, Ch.

Pr. (5th Ed.) *1577. ' The general rule is that such a bill does not lie to correct a mere error, which would, in effect, render it nothing more than a substitute for an appeal. In Perry v. Phelips, 17 Ves. *174, *177, Lord Eldon said: “There is a great distinction between error in the decree and error apparent.

The latter description does not apply to merely erroneous judgments, and this is a point of essential importance; as, if I am to hear this ease upon the ground that the judgment is wrong, and that there is no error apparent, the consequence is that in every instance a bill of review may be filed; and the question whether the case is well decided will be argued in that shape, not whether the decree is right or wrong on the face of it.

The eases of error apparent, found in the books, are of this sort, an infant not having a day to show cause, etc., not merely an erroneous judgment.” So, also, a decree against the statute law is the subject fora bill of review, as, for example, a decree directing a legacy to be distributed contrary to the statute of distributions. Stojry, Eq. PL § 405. So where a decree was entered for the sale of mortgaged premises, capable of division, to pay the whole mortgage debt, when only a small part of the debt was due. James v. Fisk, 9 Smedes & M. 144.

And where a foreclosure decree was made contrary to the terms of' the mortgage. Mickle v. Maxfield, 42 Mich. 304, 3 N. W. Rep. 961. These are manifest errors not open to controversy, and while the'modern practice has tended to allow the court of first instance to review or reverse its own decrees, for an erroneous application of the law to the facts found, whenever an appellate tribunal would do so for the same cause, this has certainly not been carried so far as to ignore the rule in principle.

That principle is that the remedy for mere error in a final decree is by appeal, and that the error apparent for which such a decree may be impeached by bill of review must be more than the result of mistaken judgment.

The ground upon which the supreme court of appeals of Virginia proceeded, and the circuit court, following the rule laid down by that court, in the cases referred to, was that the acts in question, so far as they related to supply creditors and to mining and manufacturing companies, were unconstitutional and void, as in violation of the provision of the state constitution that “no law shall embrace more than one subject, which shall be expressed in its title.” Const. Va. art. 5, § 15.

It is ordinarily held that, if the subject of .an act be expressed in the title in general terms, it will be sufficient under constitutional provisions like that quoted.

The determination of the question whether the title of a particular act is comprehensive enough to reasonably include the several objects which the statute assumes to affect is one of great delicacy, and upon which opinions mig-ht well differ; and a decree rendered upon one view or the other, while it might be reversed by the appellate court as erroneous, can hardly be said to carry that error upon its face which is required as the basis of a bill of review.

If the question of the validity of these laws was raised in this case before the rendition of the final decree, and the circuit court erroneously determined that they were uot obnoxious to constitutional objection, the remedy for such error would have been by appeal, and we do not think tliat the circuit court, because after the lapse of the term it arrived at a different conclusion in another case, could properly entertain a bill of review to impeach such a decree.

The presumption was in favor of the constitutionality of the statute and the burden of proof on the party setting up its unconstitutionality; and if the court, upon its attention being drawn to the subject, judicially recognized the acts as valid, that determined the question for the ease, if permitted to remain undisturbed without invoking the interposition of an appellate tribunal.

The fact that nearly 18 months after the decree of October 14, 1887, the court of appeals of Virginia decided these laws to be unconstitutional for the reason stated, was not enough in itself to create error of law apparent, and justify a. bill of review on that ground or that of new matter in. pais.

Undoubtedly, the courts of the United States, as a general rule, properly follow the construction placed upon the constitution or laws of a state by the decisions of its highest tribunal, unless they conflict with or impair the efficacy of some provision of the federal constitution or a federal statute or a rule of general commercial law, (Gormley v. Clark, 134 U. S. 328, 348, 10 Sup. Ct. Rep. 554;) but this rule cannot be applied where the construction contended for has not boon announced at the time of the final adjudication by the United States court, so as to make the latter erroneous on its face by relation.

On the other hand, we cannot find that these bondholders raised any question whatever as to the validity of these laws, but, on the contrary, the exceptions they filed were directed to throwing out particular claims as not within the terms of the statutes, or claims in whole or in part as barred thereunder. It is a general rule that a bill of review will not- lie to impeach a consent decree. Thompson v. Maxwell, 95 U. S. 391.

And if these complainants chose to acquiesce in the allowance of these claims under these statutes, they had a perfect right to* do so, hut ought not now to be allowed, in view of a decision rendered eighteen months after this decree, to say that error was committed in particulars which they waived by their conduct. They could not approbate and reprobate at the same time, and, in the interest of the stability of judicial decision, their want of diligence ought to be held fatal to their application. The last of these decrees was rendered October 14, 1887, and the sale of the property was made thereunder.

The amount bid at the sale was $51,000, and no exceptions were taken, (presumably because that was sufficient to cover the preferential claims, or nearly so,) notwithstanding, as alleged, the property cost the .ancestor of the Pearsons nearly $200,-000, and was sold to the company by them for some $219,000 first mortgage bonds, $101,000 second mortgage bonds, and stock of the company to the amount of $499,625, which bonds and stock the circuit court held were fully paid for by the property so sold.

The purchase was made by one of the complainants in the bill of review, whose bonds for the deferred payments were secured by his cocomplainants as sureties. The relief sought was not the vacation of the decrees of September 8 and October 14, 1887, but only of so much thereof as awarded these priorities, and the application to file the bill was not made until the 8th of May, 1889, the decision of the court of appeals of Virginia having been announced on the 11th day of the preceding April.

The decree rendered reviewed and-reversed only so much of the prior decrees as gave priority to appellants’ claims, and thereby the opportunity to bid, or get others to bid, at the sale of this valuable property, was cut off by the very decrees which were only reversed so far as their claims were concerned. It may be that such opportunity would have availed nothing, but that does not change the matter in principle. It is the rule, subject, however, to some exceptions, that, before a bill of review can be filed, the decree must be first obeyed and performed.

Thus, if money is directed to be paid, it ought to be paid before the bill of review is filed, though it might afterwards be ordered to be refunded. Ricker v. Powell, 100 U. S. 104, 108. It does not appear that these complainants had performed the previous decree when their bill of review was permitted to be filed. On the contrary, they objected that the second payment then due might be disbursed under the prior decree, and it would be impossible for them to recoup.

Nor did they ask that the sale be set aside, nor in any manner offer to place these creditors in the same situation that they occupied before that deere’e was entered; but, after having proceeded upon the theory of the validity of these laws, they came forward with their bill of review to obtain a reversal of so much of the decrees as was opposed to. their interests, leaving what was made in their favor to stand. We are of opinion that they were called upon to present their contention before, if they intended to insist upon it.

Cases are not to be tried by piecemeal, and it would open a wide door to persistent litigation if parties should be permitted to lie back, and then renew controversies in this manner. t The decrees of the circuit court appealed from are reversed, and the cause remanded, with a direction to dismiss the petition ,for rehearing or bill of review, and for further proceedings upon the basis of the finality of the decrees of September 8 and October 14, 1887, in conformity to this opinion.